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THE END IS NEAR : VENEZUELA'S ECONOMY ABOUT TO "FLAT-LINE" .














Venezuela's economy
The death of pragmatism




Sep 3rd 2014, 16:42 



by P.G. | CARACAS








IT WAS billed as a “big shake-up”. With Venezuela immersed in its most severe economic crisis since 2003, President Nicolás Maduro's announcement of a major restructuring of his government raised hopes that he might have a plan to tackle the problem.




 Instead, on September 2nd Mr Maduro ruled out any “capitalist” solution, declared his economic policy “successful” and sidelined Rafael Ramírez, the only cabinet member proposing substantial change.





Mr Ramírez, chairman of the state oil corporation and vice-president for the economy, had argued for a unified exchange rate, reducing the money supply and raising the domestic price of petrol. After months of dithering, the president finally gave his answer by moving Mr Ramírez to the foreign ministry and splitting his super-portfolio into three separate jobs, none of them in the hands of a political heavyweight.





Venezuela is in trouble. 


Such trouble, in fact, that the central bank (BCV) has not published GDP figures since the beginning of the year and is two months behind with inflation figures. 



Leaks from inside the BCV suggest annual inflation is now well over 60% and that GDP fell by almost 5% in the first half of 2014. Shortages of food, medicines and other basic goods, including spare parts and tyres for vehicles, have reached critical levels. Representatives of private health clinics say more than half have suspended elective surgery for lack of crucial supplies and parts for medical equipment. 



The government plans to address shortages by fingerprinting customers to prevent them from buying extra goods to sell on the black market.





Dependent on oil revenues for 97 out of every hundred dollars in foreign earnings, and on imports for a large part of what it consumes, the country is heavily in debt to foreign suppliers, many of whom have cut off credit. 




But instead of adopting an adjustment plan, the government has continued to print money and introduce ever more stringent price and exchange controls. 




Massive price differentials with neighbouring Colombia have fuelled the contraband trade, to which the authorities have responded by closing the border at night.





Although the president has often signalled his willingness to adopt corrective measures, he has been unable to achieve consensus among the different factions within the government. 





Many are ideologically opposed to what they see as “neoliberal” measures. 




Others merely fear the short-term consequences of price rises—including the potential loss of a majority in parliament at next year’s legislative elections. 



And some are making a fortune from the arbitrage opportunities offered by a dysfunctional economy.





The big winners, politically, from this week’s reshuffle are the hard left and the military. 



Mr Ramírez’s job as economy and finance supremo has been taken by a general. 



The new energy minister is Asdrúbal Chávez, cousin of the late Hugo Chávez, Mr Maduro’s predecessor and the founder of chavismo. 




Another man who may have reason to be satisfied is Diosdado Cabello, chairman of parliament and vice-president of the ruling United Socialist Party of Venezuela (PSUV). 




A retired military officer, with significant influence in the armed forces, Mr Cabello was one of the three most powerful figures in the regime at the beginning of the week. 




With Mr Ramírez sidelined, that number is down to two.








http://www.economist.com/blogs/americasview/2014/09/venezuelas-economy?fsrc=scn/tw/te/bl/thedeathofpragmatism

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